Editorials

Our View: Student debt-relief bill all promise, no delivery

Janet Napolitano, president of the University of California system, identified student debt as one of the most pressing national issues facing higher education.

That’s not news to hundreds of the students enrolled at UC Merced, many of whom are first-generation college students whose families are already sacrificing enormously to send their children to college. That’s not news, either, to the students at CSU Stanislaus who are trying to earn enough money from part-time jobs to buy books and gas while borrowing the costs of their tuition.

More than 70 percent of American college graduates leave school with average debt of $30,000 – IOUs that can take decades to pay off, even past the point of an entry-level salary. In California the average debt is around $20,000, still a big cloud hovering over what should be a sunny start to a career. Many delay or reject graduate school because they fear taking on additional debt.

Worse, these young people are forced to carry debt with interest rates that are two or even three times higher than what most Californians pay on their mortgages. Instead of investing in our future by helping these students, we’ve ended up making the private lenders – essentially, all of America’s major banks – even wealthier.

That’s why the California Student Loan Refinancing Program, which authorized a state revolving fund to help college graduates refinance student loan debt, generated national attention when it was signed into law last month by Gov. Jerry Brown.

Unfortunately, like all loan documents, there’s fine print. A close reading of AB 2377, which would have leveraged a pool of state money to guarantee lower-interest refinancing through private lenders, reveals that there’s little substance to the legislation.

First, there’s no money in the revolving fund. The $10 million analysts feel is necessary to launch the program was never appropriated. A smaller pot of about $6 million in existing funds that the bill’s backers had their eyes on disappeared into the general fund. And even if there was money to lend, it wouldn’t be available to everyone.

Second, only Californians with bachelor’s degrees, good credit records and jobs with the government or at nonprofits can apply for refinancing. These are the same people who can already qualify for refinancing privately. Many in that group – doctors and teachers, for example – already have access to special federal debt-relief programs and state loan-forgiveness programs. For them, the revolving fund is just one more perk.

Those with hope for the program say it’s a first step toward an actually useful debt-relief pool; now that the legal authority exists, they say, lawmakers can add money next year. We won’t hold our breath. This fanfare-wrapped nothingburger is all bun and no beef.

If legislators really want to do something to help students and their families, they need to put our money where their mouths are. Perhaps they first fund the program, then broaden access to their so-far empty pool of refi money. Better yet, find a way to underwrite income-based repayment arrangements for the many unemployed and underemployed student debtors out there. There are an awful lot of baristas and temp workers with four-year degrees who could use a hand.

At the least, they could encourage debt counseling – not just a sales job for private loans – for incoming freshmen.

Napolitano is right: A generation of college graduates staggering under a crushing debt load is a pressing national issue. But empty promises won’t help get them out from under it.

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